The US dollar is set to weaken against its Australian counterpart today as investors look into confidence data from both nations. Traders are also paring bets that the Federal Reserve will signal a change to its asset-buying program at the end of its two-day meeting tomorrow.
The Conference Board is forecast to show that consumer confidence in the world’s largest economy weakened this January. The composite index from surveyed households is estimated to decline to 64.8 points from a 65.1 rating last December. Confidence has been on a downtrend from the upwardly revised 73.1 grade for October due to fiscal debates in recent months.
The dropping level consumer confidence is seen to push the Federal Reserve to halt a speculated mid-2013 end to its third round of asset purchases. A record of the central bank’s December 11-12 meetings released on January 3 showed that officials began debating an end to its unprecedented bond-buying as early as this year. The Federal Open Market Committee’s minutes showed that participants were “approximately evenly divided” between those who said it would be appropriate to end QE3 this year or to continue beyond that date.
In fact, the median estimates in a Bloomberg survey of economists point out that Fed Chairman Ben S. Bernanke’s latest round of bond buying will reach $1.14 Trillion before he ends the program in the first quarter of 2014. Bernanke will push on with purchases of $40 Billion a month of mortgage bonds and $45 Billion a month of Treasuries, according to the survey.
In the Pacific, risk sentiment in Australian assets rose following a three-day holiday weekend as the nation’s business confidence for December rebounded by the most in more than a decade. National Australia Bank Ltd.’s confidence index rose to 3 from minus 9, according to a report released today. The increase is the biggest improvement in sentiment since October 2001. Further, the business conditions gauge, a measure of hiring, sales and profits, improved to minus 4 from a revised minus 6. This boosts demand for the Aussie today.
Taking these fundamental data into consideration in the day’s currency exchanges, a long position is advised for the AUDUSD. However, be on the lookout for probable technical corrections.
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